Technology is changing the media environment, calling different business models into question. The newspaper business is just one example: chances are, nowadays, most of you read them online (and for free). News Corp (NASDAQ:NWSA), Grupo Televisa SAB (ADR) (NYSE:TV) and Viacom, Inc. (NASDAQ:VIAB) are three media giants that are playing (and struggling) in this shifting field. Let’s take a look at them in order to determine if they still have some growth potential left in them.
The new News Corp (NASDAQ:NWSA) is multinational media firm focused on the publishing business. The company formed after the recent split of the former News Corp., which left 21st Century Fox with its entertainment assets, and News Corp. with its newspapers and publishers, plus a few non-related Australian assets.
With the newspaper industry facing structural headwinds, News Corp (NASDAQ:NWSA)’s overall long-term prospects don’t appear particularly positive. Newspaper sales are declining as the overall news consumption behavior changes in favor of free online media. Advertising dollars have also been moving from traditional newspapers to online platforms for over a decade, a tendency that is likely to continue. It should be mentioned that News Corp. has a strong market share in the U.K. and Australian newspaper markets, which face the same headwinds.
Yet, as we said, the firm has more assets than newspapers, and these hold better growth prospects. News Corp (NASDAQ:NWSA) owns 61% of the RED group, a major player in the Australian online real estate classified market, and 50% of Foxtel, Australia’s only pay-TV provider. With both businesses expected to do well in the near term, they could help compensate for the expected sales decline in News Corp.’s newspaper business.
News Corp (NASDAQ:NWSA) trades at $15, or 0.5 its book value, a 76% discount to the industry average. The firm may have media wizard Rupert Murdoch as chairman, but most of the company’s entities lack economic moats and offer slow growth in the horizon. My take? I wouldn’t rush on buying.
Viva la tele!
Mexico’s Grupo Televisa SAB (ADR) (NYSE:TV) is the largest media company in the Spanish-speaking world. The firm’s huge market-share in broadcast and pay TV provides it with a wide economic moat, as it has created significant barriers to entry for other companies.
TV broadcast operations are the backbone of the firm, accounting for almost 50% of its overall operating profit and consistently achieving EBITDA margins of over 45%. Grupo Televisa SAB (ADR) (NYSE:TV) owns and manages four TV stations in Mexico City (and many repeater stations across the country), an impressive figure taking into account that TV Azteca, its major rival, holds just two. More importantly: Televisa’s stations are extremely popular, and with 70% of average prime-time audience share, they are extremely popular for advertisers. At the same time, the Mexican pay-TV market, where the company is a key player, is still quite young (current pay-TV penetration is below 50%), which offers substantial opportunities for future growth.
On the downside, I should point out that although the company has benefited from a rather benign regulatory environment, Mexico’s new telecommunications reform bill may affect Grupo Televisa SAB (ADR) (NYSE:TV)’s broadcasting market share if the newly formed regulator (Federal Telecommunications Institute) requires the firm to disinvest or grant licenses to new entrants.
Grupo Televisa SAB (ADR) (NYSE:TV) trades at $26, or 27.9 times its earnings, a 53% premium to the industry average, and offers a 0.51% yield. The firm’s second-quarter results were better than expected, with net income increasing 23.9% year over year and a declining debt-to-capitalization ratio. It doesn’t look cheap right now, but it certainly has growth potential.